Rosemont Inc.

With every cab ride to and from a Chicago airport, 25 cents of the fare goes to a tiny suburb renowned for insider dealing and outsize clout.

Those coins add up to millions a year for the suburb — Rosemont — and help fuel a political machine that thrives under Illinois' mix of lax borrowing, spending and ethics rules.

Rosemont's massive Allstate Arena, plush Akoo Theatre and cavernous Donald E. Stephens Convention Center have long raked in cash from visitors, while officials, in turn, unabashedly paid out multimillion-dollar no-bid contracts to the family and friends of the town's ruling family: the Stephenses. Even a cleaning firm owned by the mayor's brother gets about $4 million a year.

Rosemont contractors, meanwhile, keep the Stephenses powerful by pouring money into political funds controlled by the family — nearly $2 million in the last five years. The campaign cash frequently ends up with top state politicians and in the pockets of family members.

In Illinois, all of this is as legal as the tax that lawmakers levied on cab riders to aid Rosemont.

An investigation by the Chicago Tribune in conjunction with Northwestern University's Medill Watchdog has documented how Rosemont officials pay out government cash to friends and family while extending their power across Illinois. It is a story of big building and big contracts fostered by big borrowing — one that stretches back decades and continues today as Rosemont launches yet another round of taxpayer-backed expansion.

The recession has sapped Rosemont's village-run businesses, creating multimillion-dollar general fund shortfalls. Still, the suburb is digging itself deeper into debt to subsidize a new bar district, professional softball stadium and outlet mall. With $370 million in taxpayer-backed loans outstanding, Rosemont has one of the top debt loads in the Chicago region.

Bradley Stephens, a son of the suburb's founder and the only other mayor Rosemont has had, said his village is on a profitable path.

Stephens makes no apology for his family, their friends and longtime business associates landing high-paying jobs or getting cuts of the multimillion-dollar government contracts he helps control.

And, like his father before him, Stephens said Rosemont's model is a win for everyone. The state gets payroll and sales taxes. Many of the 4,200 local residents live in a gated community, pocket thousands of dollars in annual cash grants and work out in a subsidized gym. Seniors and town workers get a rent break on village-owned apartments.

"There is nothing to be ashamed of," Stephens said. "I would stand up like a peacock and bellow how wonderful (Rosemont) is."

Yet others are paying a price. Those subsidizing the machine include local businesses, hotel guests, concertgoers or anyone taking a cab to or from O'Hare or Midway airports. Those costs are mostly borne by people who don't live in Rosemont.

"They could be suburbanites or people from Carbondale or Calcutta for that matter," said John Jackson, political science professor at the Paul Simon Public Policy Institute at Southern Illinois University Carbondale.

"They are doing so at probably inflated prices, because ultimately you can't keep the prices under control with this type of system."

Family business

To understand how Rosemont works, imagine getting the Stephens family together in one room.

In that room would be four of the village's top officials, paid a combined $666,000 last year.

In the family-filled room would be co-owners or shareholders of firms that have landed nearly $40 million in payments for village work over the past five years.

And in the room would be people who have collected money and benefited from the Stephenses' political funds.

They all can thank the family patriarch.

Rosemont founder Donald E. Stephens is credited with piecing together patches of land around O'Hare in the 1950s to build a wealthy hotel and entertainment destination.

The elder Stephens' wealth grew with his village. He clawed his way from pumping gas and peddling insurance to running a hotel and investing in varied businesses. One of his first big forays involved buying a hotel from a reputed mob boss.

As O'Hare was taking off, the 1970 state constitution included a "home rule" provision that lifted restrictions on how much towns could borrow. Small towns like Rosemont could ask voters to approve the new power, and Rosemont became one of the first in the state to do so in 1972.

After that vote, Stephens' Rosemont started taking out huge loans to turn an old industrial warehouse into a convention center, then construct an indoor stadium and later a theater.

Rosemont was an Illinois pioneer on two fronts: It showed how towns could make big bets on economic development through taxpayer-backed borrowing. And, for politicians, it showed how even the tiniest village could build a massive political machine through the projects the borrowing allowed.

That model has been adopted to varying degrees across the suburbs — most notably in Bridgeview. A Tribune investigation in June detailed how the southwest suburb borrowed big to build a soccer stadium that benefited insiders but now can't cover its loan payments, so taxpayers must subsidize it.

Thanks in part to Rosemont's lucrative proximity to O'Hare, the suburb has avoided large financial debacles. But the village's ruling family has long courted controversy for insider deals that enriched its members.

Loyalty rewarded

As Rosemont was budding in the 1970s, mayoral pal Ray Rosato paid a visit to a local factory executive.

The village needed the factory's land, and Rosato offered to sell the executive a plot he owned with partner Isaac Degen in another part of town. Stephens later offered to extend roads, water and sewer lines for free. Rosemont even paid the factory enough to cover the costs of a new facility.

Behind the scenes, Stephens collected $87,000 from an interest in the deal. Eventually, Stephens, Degen and Rosato were indicted on fraud charges.

In a 1985 verdict, a jury found the three did nothing illegal. A federal judge said they were just being good businessmen.

Degen and Rosato stayed on as consultants to oversee the village's major construction projects. They built the stadium and expanded the convention center, now named after the first mayor.

The two turned up as partners in the contract to build a casino in Rosemont — a project wrangled by the former mayor's tremendous political clout but ultimately undone amid accusations of insider deals and organized crime influence.

They also partnered with Stephens family members in a catering company given exclusive rights to provide food at the convention center.

Other friendships have been lucrative for the family too.

Nick Boscarino, whom the state gaming board accused of having mob ties, had partnered on a convention business with Donald E. Stephens and a cleaning company with the mayor's son Mark.That was until Boscarino was caught helping cheat Rosemont out of nearly $300,000 in an insurance scheme.

As the scandal brewed, the mayor announced he and the village were cutting ties with Boscarino.

Even after Boscarino's conviction in 2004 on money laundering charges, the village's go-to developers, Degen and Rosato, partnered with Boscarino in companies that state and county records show are tied to non-Rosemont properties.

Boscarinocould not be reached for comment. Neither Degen nor Rosato returned calls for comment.

Degen and Rosato are in the midst of Rosemont's newest major project. Bradley Stephens said Degen and Rosato are partners in a company that got $26 million in contracts to manage the construction of the softball stadium and new bar district.

New project, old ways

On a recent tour of Rosemont, BradleyStephens showed off the crown jewel of the expansion: a made-to-order town square amid the din of the Tri-State Tollway and overhead jets.

MB Financial Park at Rosemont, previously called The Park at Rosemont, is packed with a comedy club, bowling alley, bars and restaurants, all of them built big and topped with spare-no-expense finishes. The grown-up play land is anchored by an artificial-turf park that hosts bands in the summer and converts to an ice rink in the winter. All of it is publicly financed.

As Stephens dodges construction trucks in his SUV, the blunt-talking 49-year-old former carpenter could easily be confused with the CEO of a family-run development company.

He talks of jetting across the country to personally woo owners of bars and other attractions to set up shop in his village. He pauses at times to inspect the craftsmanship. He offers primers on development strategy, filled with phrases like "vertical subdivision."

Through it all is a confidence that the project is well on the path to profitability.

"Things are going to start really coming together," he tells a reporter. "Absolutely."

Rosemont's veteran financial adviser said the $100 million makeoverhas been thoroughly vetted. And he points to the staying power of the suburb's convention center and arena as evidence the plan will work.

"Understand that nothing has failed in that village," financial adviser Merrill Ring said. "The fact that nothing has failed is a testament not only to that location (near O'Hare), but to the care and attention of the management."

But the village does not routinely employ a commonly accepted practice of good governance: competitive bidding.

Degen, Rosato and their partners, Northern Builders, did not have to directly compete with anyone for their contract from the village. In essence, the no-bid contract puts them in charge of hiring firms that help build the complex.

Even contracts given to firms with ownership ties to the Stephens family are done without bidding.

Beyond the cleaning contract with the mayor's brother, two other companies tied to the family have reaped deals at Rosemont's convention center — where the taxi tax money is flowing.

Rosemont Catering Co. has the exclusive contract to provide food to conventioneers. Donald E. Stephens' widow as well as his daughter — Bradley Stephens' sister — were listed as owning a combined 15 percent stake in the company in 2006, the last time such detailed records were filed with the state.

It is unclear what stake they hold today, if any. Neither of the Stephenses could be reached for comment; the company didn't return phone calls.

Then there is Rosemont Exposition Services, which has the exclusive contract to set up trade shows and is paid more than $5 million a year to manage the convention center and provide labor at the arena and theater.

BradleyStephens said that some family members are shareholders. One of them is his nephew, town police Chief Donald Stephens III, according to disclosure reports.

The convention industry is well-known for markups, and Rosemont is no different. For a recent trade show, exhibitors found a 24-ounce bowl of pretzels cost $23, while renting a standard table, two chairs and a wastebasket cost $185. Those prices are before various service charges, taxes and late-order markups.

Stephens said that no-bid deals — even those offered to family members — are actually good for taxpayers. If the village needs to tweak duties in contracts, low bidders could refuse or gouge the village. No-bid vendors are flexible.

And, the mayor said, he is hard on his family.

"Believe me," Stephens said, "those people who are my family members that do jobs here, have employment here, have contracts here … I hold them to a different standard."

Stephens also says the village employs "a gaggle of lawyers" to ensure everything is legal.

The bar isn't high. Illinois' laws on bidding and nepotism are notoriously lax.

For example, in Texas, town leaders are forbidden from hiring relatives for government jobs. In New Jersey, towns must open most contracts for public bids. And in Alabama, a no-bid contract to a relative of a mayor would violate its state law in multiple ways.

Illinois, however, lets home-rule towns largely decide for themselves what's ethical, leading to a patchwork of rules.

Cook County elected officials aren't supposed to hire relatives.

Evanston officials can't oversee relatives' contracts.

Naperville not only bans relatives from jobs and most contracts, but also requires bidding for almost all purchases.That even includes comparing proposals before hiring city lobbyists.

Yet in many towns, such as Rosemont, there are few, if any, rules. The attitude of many officials is that such matters should be up to a town's voters.

"I'm always concerned with nepotism and insider dealing on contracts," said state Sen. Kirk Dillard, a Hinsdale Republican who has long gotten political support from the Stephens family. "But in some of these instances, it would be the citizens of Rosemont that need to be the most observant and vigilant."

Residents got a rare choice at the ballot box after Donald E. Stephens died at the helm at age 79. Bradley Stephens was appointed acting mayor, then faced a challenger in the 2009 local election.

Opponent Joseph Watrach campaigned on the message that the family and its friends profited too much from town spending.

On Election Day, 1,096 votes were tallied. Only 98 of them were for Watrach.

"Our people understand what we are doing," Stephens said. "And honestly, that is who I've got to respond to."

Generous fans

At the same time that the town wields subjective control over how it selects vendors, the Stephens family has regularly asked those vendors to contribute to its political funds.

An analysis by Medill and the Tribune studied donors who gave at least $10,000 to either of three political funds controlled by the family from 2007 through 2011. Excluding donations made directly by family members, the analysis found that 57 of 73 donors — about 8 in 10 — had ties to village business.

"It raises concerns because the appearance is that people who give money have an advantage," Redfield said. "There is also a concern that this drives up people's cynicism and lack of trust."

The last mayoral opponent, Watrach, said in a recent interview that, as a businessman in Rosemont, he felt pressured to give, and his refusal sparked retribution that led him to try to unseat Stephens.

The mayor denies anyone is pressured, and he dismissed Watrach's allegation as political sour grapes.

Many top donors either did not return messages or declined to comment. But of those who did, none said they felt pressured.

"We give back to the community that gives us work," said John Vahey, owner of a construction firm that has contributed $44,000 to Stephens family political funds in the last five years.

Giving even more was Krimson Valley Landscape Contractors. During those five years, it gave more than $100,000 and got $6.5 million in work. Owner Michael Balleto said the firm gave Rosemont officials so much money because "they develop great benefits for the community and the residents."

Balleto doesn't enjoy those benefits directly — he doesn't live in Rosemont — but he said that's irrelevant.

Such large donations from Krimson and other vendors helped the Stephens family far outpace the fundraising of most other suburban leaders — nearly $9 million since 1999.

Illinois doesn't stop local contractors from giving to local officials. Municipalities can pass stricter rules — Chicago, for example, restricts the size of such donations — but Rosemont and many other towns don't.

The Stephenses' fundraising could have been reduced by a 2009 state law that limited contributions to $5,000 from an individual and $10,000 from a company. But this year another Stephens-tied fund was set up —a special political action committee — that is allowed under state law to take in larger contributions.

In its first three months, that fund raised $300,000. That boosted the total take of family-tied political funds to the most they've ever raised in the first quarter of any year, for at least as far back as the state's data can show.

All of that campaign cash has provided yet another financial well for the Stephens family to tap.

The funds paid more than $1 million since 1999 to a firm called Braile Services for fundraising efforts. The firm was long run by BradleyStephens but was transferred to his brother — Rosemont's public safety superintendent — in 2007. In essence, the political funds controlled by the family have been paying a firm started by the family to raise more money for the funds controlled by the family.

The political funds also once paid more than $240,000 to a legal expense trust for the late Donald Stephens and $30,000 to a family member for producing a political fund journal.

BradleyStephens said some of the money goes to charities. But another of the funds' missions over the years has been to build the tiny town's clout.

For Republicans looking to match Democratic fundraising in the state, the Stephenses can be a key ally.

"Every major candidate always goes to the mayor and tells them their story and sees if they can get financial support," said state Rep. Angelo "Skip" Saviano, an Elmwood Park Republican mentored by Donald E. Stephens. "That is just a fact of life, and that is the political reality that we live in."

That clout came in handy in 2010 when Rosemont got a seat at the table for discussions about state subsidies.

Silent partners

For a week, Bradley Stephens recalled, he lived in Springfield, doing his best to twist arms and bend ears for a Statehouse bill to help Rosemont.

The Internet had taken a toll on the convention business, Stephens said,and it was made even worse by the recession. The bad economy had eaten into the rest of Rosemont's revenue as well. Fewer visitors meant less tax money, and the village would end 2010 with three years of general-fund deficits totaling $26 million, according to state filings.

To help bridge the gap, the village could have stopped giving residents grants of up to $3,000 to ease their tax burden, or even sought to save money through competitive bidding.

But that week in Springfield, Stephens and his supporters latched onto a state subsidy bill. The proposal was originally intended to bail out the much bigger McCormick Place convention center in Chicago. Rosemont was able to add itself to the legislation. Stephens argued that his village also had a big convention center facing competition from other subsidized halls across the country, so it deserved a subsidy if Chicago was in line for one.

Among those supporting the deal were longtime beneficiaries of the Rosemont political machine. Over the last five years, funds tied to Bradley Stephens have given more than $200,000 to statewide politicians, most of them high-ranking Republicans.

The suburb stood to gain roughly $2 million a year in taxi taxes that could be used to renovate the suburb's convention center and pay down its debt. Plus it was to get a $5 million annual state subsidy to offset the costs of incentives to lure convention business.

As lawmakers debated the legislation on the House and Senate floors, no one raised questions about how state money and taxi taxes would be used at a convention center long riddled with insider deals for the Stephenses.

Instead, lawmakers praised the small suburb — then passed the legislation.

"When people think of Chicago," Dillard told colleagues, "it's just not only McCormick Place, but people from all over the world rave about Rosemont and the great convention center, and it is a model, a model of convention centers throughout the United States."